Should I insert a Cost Approach Disclaimer in my Report?

Q. Will a disclaimer stating that others should not use the Replacement Cost data in my appraisal report for insurance purposes protect me if a lender uses the information anyway?

A.  While no disclaimer can fully protect an appraiser from potential legal action, we recommend a disclaimer that clearly states what your Replacement Cost Data can and cannot be used for, as well as the limitations of the data itself.  Below is the disclaimer that we recommend.  Feel free to use it in your residential appraisal reports, but please edit it to suit your practice and Clients.

“Disclaimer: The purpose of the Cost Approach is to help estimate and support the subject property`s market value (NOT to estimate the Replacement Cost of the subject improvements). The appraiser expressly prohibits the use of this information for any other purpose. No information in this appraisal report is suitable for determining the amount or type of insurance coverage to be obtained for the subject property. If used for that purpose, the appraiser assumes no liability and does not guarantee that any insurable value estimate inferred from this report will result in the subject property being fully insured for a casualty loss.

Many resources are available to help determine the amount of insurance coverage that property owners should obtain for a specific property. The appraiser recommends obtaining data from one of those sources. Further, the Cost Approach may not include a reliable indication of Replacement Cost New for any time frame other than the effective date of this appraisal due to fluctuations in the cost of labor and materials, as well as ongoing changes in building codes, governmental regulations, and other requirements.”